NAPSR PRESS RELEASE - January 27, 2006
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PHARMACEUTICAL SALES COMPENSATION OUTLOOK FOR 2006
Surveys have shown that the pharmaceutical industry has been expanding its sales force at record rates over the last 4 years. The pharmaceutical industry is also looking to grow its sales force in 2006. In fact 15 percent of the biotech companies and 22 percent of the specialty pharma companies surveyed planned to grow “a great deal” and another 65 percent and 18 percent respectively, planned to grow “steadily” over the course of 2006.
Two out of three surveyed companies plan on introducing new pharmaceutical products in 2006. With this growth and new product launches the companies are also looking to “improve sales-force productivity”. In 2006, companies are also reporting that they expect nearly every type of pharma sales rep to make fewer calls, which is surprising. On average, sales reps are now expected to make 8 calls a day, down from nine. This change probably means that pharmaceutical companies are being more realistic in their expectations as they are emphasizing the need for quality interaction with physicians.
The pharmaceutical industry has traditionally been a sales-dominated business, in contrast to the consumer good industry which is dominated by marketing functions. With the focus of the pharmaceutical industry being on its sales force, starting salaries for entry-level sales rep is significantly higher than for a beginning salesperson in other industries. In fact, once incentive compensation is factored in, the average entry-level pharmaceutical sales rep earns 32% more than their counterparts in other industries. The mix of base salary and incentive pay is shaped by an organization’s competitive objectives. Generally in 2005, companies aimed to make the base salary about 75% of total compensation, the rest is incentive compensation.
The good news for pharmaceutical sales people is that the total compensation has continued to grow for them. The average sales rep earned $89,600 in total compensation in 2005, compared with $82,900 in 2004. Increases were particularly marked among specialty reps. The average first year level specialty rep total cash compensation jumped from $73,200 in 2004 to $84,000 in 2005. Pharmaceutical companies are also using a variety of additional cash and non-cash rewards in an effort to recognize extraordinary sales efforts. These non-cash rewards, in fact, often have greater impact than the formal incentive-compensation plan in motivating their sales staff. Companies appear to be increasing other benefits such as upgrades in car options and single rooms at sales meetings.
Industry knowledge and formal pharmaceuticals sales training is also on the increase for entry level reps and applicants. New hires are no longer afforded a leisurely orientation period before they are expected to begin contributing. Over the past several years, the trend has been to put new hires in the sales field sooner and sooner. Entry- level pharmaceutical sales training and certification programs has allowed companies to more effectively do this and become more productive. In fact it has been proven that CNPR graduates do not need the same degree of training before they begin detailing physicians.
In summary the pharmaceutical market is vast, complex and very dynamic. There is now simple way to measure and reward sales performance with complete accuracy and fairness. However, pharmaceutical companies never stop trying to come as close to this ideal as possible.